President Obama has been calling for a short-term solution to avert automatic, across-the-board budget cuts, scheduled to kick in on March 1, by combining smaller cuts with revenue raisers. But, he also told House Democrats yesterday that he is “prepared, eager and anxious” to produce the broad fiscal package that has so-far eluded Washington to stave off the effective date of the $1.2 trillion package of automatic spending cuts, called the sequester. The automatic cuts are part of a 10-year, $1 trillion deficit reduction plan that was supposed to spur Congress and the administration to take action on long-term fiscal policies to stabilize the nation’s debt.
The automatic cuts were set to take effect January 1, but the “fiscal cliff” deal brokered on New Year’s Eve between the White House and Congress effectively postponed the automatic reductions to March 1. Finding deficit reductions of up to $85 billion is necessary to put off once again the automatic cuts until the start of the new fiscal year. The government’s fiscal year ends on September 30.
Obama has insisted that any efforts to reduce the deficit be “balanced” between spending cuts and new tax revenue. Senate Democrats said the party has not yet agreed on the balance of tax hikes and spending cuts in the package, on how big the package would be, or on how much of the sequester it would replace.
Speaker John Boehner (R-OH) and House Republicans insist the sequester should not be delayed unless Democrats agree to a different set of spending cuts. In “fiscal-cliff” deal, the White House already got major tax hikes with no corresponding spending cuts, so Republican are adamant that tax hikes are out of the question. Republicans are also insisting That Democrats must put entitlement spending on the table. “Let me be straight and say the things we are not supposed to say because it is political suicide: If we don’t reform Medicare, Medicaid, and Social Security, it doesn’t matter what else we do, we will not solve this problem, said Joint Economic Committee ranking member Senator Dan Coats (R-IN).
Half of the spending cut by sequestration would occur in the nation’s defense budget, and Defense Secretary Panetta said sequestration’s defense cuts “would devastate our armed forces.” Other agencies would be responsible for the rest of the reductions. Members of the Senate Appropriations Committee said a hearing is being planned next week to highlight the impact of the budget cuts. Separately, Democrats on the House Appropriations Committee said they soon will unveil a detailed report on how the $85 billion in expected cuts in 2013 will affect different areas of the government.
Meanwhile, federal agencies are preparing for the possibility of furloughs as the March 1 deadline looms. Sequestration could require that the USDA’s Food Safety and Inspection Service “furlough over 6,000 food inspectors for two to three weeks,” Agriculture Secretary Tom Vilsack said this week in a speech. “As soon as you take an inspector off the floor, the plant shuts down,” Vilsack added, noting that removing inspectors even for a short period would affect several hundred thousand workers and would affect the supply of meat and eventually consumer prices.
